Annual Report 2018

A New Electricity Market for a Sustainable and Secure Future.

Who Are EirGrid Group?

EirGrid Group is responsible for a safe, secure and reliable supply of electricity – now and in the future.

We develop, manage and operate the electricity transmission grid through EirGrid in Ireland and SONI in Northern Ireland.

Our transmission grid brings power from where it is generated to where it is needed throughout Ireland and Northern Ireland. We use this grid to supply power to industry and businesses that use large amounts of electricity.

Our grid also powers the distribution network. This supplies the electricity you use every day in your homes, businesses, schools, hospitals, and farms.

EirGrid Group includes SEMO - the Single Electricity Market Operator. SEMO operates the wholesale electricity market across the island of Ireland.

A new Integrated Single Electricity Market went live at 11pm on 30 September 2018. By integrating the all-island and European electricity markets, it enables the free flow of energy across borders.

EirGrid Group also owns and operates the East West Interconnector, a high-voltage link between the electricity grids in Ireland and Great Britain.

We develop new electricity infrastructure only when it is needed. We support competition in energy, promote economic growth, facilitate renewable energy and provide essential services.

EirGrid plc is a commercial, state-owned company. We answer to Government, and to the Commission for Regulation of Utilities. SONI Ltd is a wholly owned subsidiary of EirGrid Group, and is regulated by the Utility Regulator in Northern Ireland.

We work for the benefit and safety of every person in Ireland and Northern Ireland. We follow strict laws and safety standards.

Chairperson's Report

John O'Connor, CHAIRPERSON

Working together to secure the future of electricity throughout the island of Ireland

I am delighted to present the 2018 Annual Report of the EirGrid Group under the theme of “A New Electricity Market for a Sustainable and Secure Future”.

The past year has seen the electricity industry in a period of rapid transformation.

The energy mix is shifting towards lower-carbon sources, driven by technological advances, growing environmental concerns and national and international policies.

During the year EU energy ministers agreed an ambitious, binding renewable energy target of 32% by 2030, up from the previous goal of 27%.

In Ireland and Northern Ireland we are working towards Government targets of 40% of electricity consumption to come from renewable sources.

This is a challenging target and we are making good progress towards achieving it by the target date of 2020.

However, we cannot rest on our laurels. In July, the Irish Government announced a new “Renewable Electricity Support Scheme” that will provide support to renewable electricity projects in Ireland and raises the target from 40% to 55%.

At the same time, there are increasing levels of customer interaction and building a stronger and better relationship with customers is of growing importance for us.

On the demand side, we are seeing an increase in the adoption of electric vehicles and the switch from gas to electricity for heating residential and commercial buildings.

We also have to make sure that the power system operates securely and efficiently, while facilitating ever higher levels of renewable energy.

Against this backdrop, EirGrid Group is working with the regulators in Ireland and Northern Ireland, and has delivered a fundamental restructuring of the wholesale electricity market on the island.

The Integrated Single Electricity Market project has been completed and the new Single Electricity Market (SEM) represents a significant change to the Irish electricity sector.

The grid in Ireland and Northern Ireland is a relatively small synchronous transmission system, with links to European markets through Great Britain via the Moyle Interconnector to Scotland and the East West Interconnector into Wales.

With the advent of the new SEM, we are now part of a pan-European Internal Energy Market that comprises 20 countries, linked by 38 crossborder interconnectors, representing a total generating capacity of over 3,000 terawatts.

We are hoping to increase the number of interconnectors to 39 with our proposed Celtic Interconnector, a joint venture with our French counterparts RTE and the first direct link to the continent. This project, if it successfully progresses, is expected to go live in 2025.

The North South Interconnector project will provide a vital link between the two grids on the island.

Subject to resolving the planning challenges in both jurisdictions, we will be endeavouring to bring this critical project to fruition as quickly as possible.

Together with the new SEM, this will enable the Group to realise our ambition of maximising the considerable benefits of an all-island electricity system and market.

The past year has seen a number of notable achievements for the group.

We are now managing the grid with up to 65% variable renewable energy; the new SEM is live and performing to expectations; we rolled out our new Enduring Connections Policy that will speed up the connection of renewable energy to the grids; and we continue to invest in the grids.

I would like to thank each of my fellow directors for their significant contribution and support during the year.

I was pleased to welcome Tom Coughlan to the board. Tom has extensive senior management and leadership experience having retired as chief executive of Clare County Council following a career in local government.

I wish to record my thanks to Dr. Joan Smyth who left in the past financial year after giving outstanding service over many years.

I also want to thank the executive directors and all of our staff for their commitment and effort during the year.

Special thanks are due to our former chief executive Fintan Slye, who left in December 2017 to take up a challenging new role in Great Britain.

Fintan provided dynamic forwardlooking leadership to the group over the past five and a half years. The programmes of change and innovation which he championed have left the group in a much better place. I greatly appreciate his help and support to me as chairperson.

I also wish to thank our Finance and Legal Executive Director Aidan Skelly who stepped in as interim chief executive following Fintan’s departure. I was delighted to welcome Mark Foley who took over as chief executive in June 2018.

Finally, I also wish to thank former Minister Denis Naughten T.D., as well as the new Minister for Communications, Climate Action and Environment, Richard Bruton T.D., and his officials. Similarly, I wish to thank officials in the Department for the Economy in Northern Ireland. Both departments provided constructive relationships and support throughout the year.

Chief Executive's Review

Mark Foley, CHIEF EXECUTIVE

2018 was another year of good performance for EirGrid Group. During the year, revenue increased from €579.4m to €758.4m. Profit before tax was €65.8m, with underlying profit at €18.7m. As a result, we expect to be in a position to deliver a proposed dividend of €4.0m to the shareholder.

Over the 12 months, we continued to operate a safe, secure, reliable power system in Ireland and Northern Ireland. We managed this successfully while delivering a major restructuring of the all-island electricity wholesale market.

The Integrated Single Electricity Market (‘ISEM') project is now complete and is a new wholesale electricity market for Ireland and Northern Ireland and went live on 30 September 2018.

The new market arrangements are designed to integrate the all-island electricity market with European electricity markets, making optimal use of cross-border interconnectors, enhancing security of supply, delivering increased competition and further enabling the integration of renewables onto the system.

For EirGrid and SONI, building and delivering the I-SEM project and operating the new SEM represents a tremendous achievement and is testament to the skill and commitment of our people.

There have been significant developments made on the grid. We are making excellent progress on the Kilpaddoge - Knockanure Cable Project in North Kerry and are working on a significant project that will reinforce the network in the west of Ireland, the North Connacht Project.

In Northern Ireland the Agivey Cluster Project is a major development that will connect a group of wind farms in the North West to the grid. All three projects will help facilitate our transition to a low-carbon energy future.

We continue to progress the North South Interconnector project to strengthen the system across Ireland and Northern Ireland and our Celtic Interconnector project will create a vital link between the Irish and French electricity grids during the next decade.

Over the past two or three years, we have reshaped the way we work with communities and landowners, through early, progressive and meaningful engagement.

It centres on bespoke approaches for engaging with communities in Ireland and Northern Ireland. This new approach puts landowners and communities at the forefront of the conversation when we are seeking to develop new projects.

Since 2017, we have introduced scenario planning into our grid development process.

“Tomorrow's Energy Scenarios” involves examining the range of ways that energy usage may change out to 2040.

The research shows that the electrification of the heating and transport sectors will lead to further increases in electricity demand. Similarly, the electricity generation portfolio will continue to decarbonise, with increasing levels of renewables connecting to the system.

We believe “Tomorrow's Energy Scenarios” will encourage a flexible and robust approach to grid development that will enhance our decision making. It will also allow us to manage uncertainties and prepare for the changes of the future.

Over the coming years we estimate that growth in electricity demand in Northern Ireland will be modest, while in Ireland electricity demand is increasing significantly. This is due to growth in the economy, population growth, new investment in infrastructure and industry and strong growth in new data centres.

Data centres generate major investment in the economy, they strengthen the footprint of major Information Communications Technology (ICT) players in the Irish economy and they create employment. They are providing the backbone for e-commerce and business operations in Ireland and Europe.

Data centres are major consumers of power; notwithstanding the fact that today’s cloud computing technology is at the frontier of driving energy efficiency and procuring green energy. Our analysis shows that demand from data centres will most likely increase by a factor of four between 2016 and 2020. A significant proportion of this extra load will materialise in the Dublin region.

We are working closely with the Government, the IDA and other stakeholders to ensure we can accommodate this increased demand in an efficient manner. The network around Dublin will require significant reinforcements over the next five years.

The Government policy statement on data centres published in June is most welcome, particularly its acknowledgement that a more balanced regional development approach is required for future data centre developments.

Renewable energy, primarily on-shore wind, remains the fastest-growing fuel source on the island. Early estimates indicate that we continue to close in on Government targets that 40% of electricity consumption is to be met by renewable energy by 2020 in Ireland and Northern Ireland.

EirGrid and SONI are acknowledged world leaders in meeting the technical challenges involved in running a power system with very high-levels of wind energy.

In April we announced that EirGrid and SONI can successfully manage record-breaking levels of renewable power. There is now up to 65% variable renewable energy being handled on the grids at any given time. This is predominantly made up of wind power, along with contributions from solar and interconnector imports. Our goal is to raise this limit to 75%.

This is an exceptional achievement by scientists and engineers at EirGrid and SONI. Based on this expertise, we are leading a major EU research project into the deployment of renewable energy. EU-SysFlex comprises 34 organisations from 15 countries across Europe and has a budget of €26 million. We look forward to this programme delivering solutions which can enable close to 100% renewables on the system at some point in the future.

Financial Review

Aidan Skelly, EXECUTIVE DIRECTOR, FINANCE & LEGAL

Financial Stability to support Future Investment

Key Financial Highlights

Operating profit increased significantly from €21.8m in 2017 to €82.9m in 2018. Profit before tax also increased significantly from €3.4m in 2017 to €65.8m in 2018. This is mainly as a result of higher demand related tariffs collected during the year and lower than anticipated costs relating to new DS3 System Services arrangements. The lower costs reflect the lower than anticipated level of wind on the system during the exceptional summer weather.

EirGrid Group consists of regulated entities, which means reported profitability is adjusted due to over and under recoveries in prior years. Disregarding such adjustments, underlying profit before tax for the Group was €18.7m in 2018.

Regulation

Our TSO activities in Ireland and Northern Ireland are regulated by the Commission for Regulation of Utilities and the Utility Regulator respectively.

SEMO in its role as Market Operator for the SEM, is regulated by the SEM Committee. This comprises the Commission for Regulation of Utilities, the Utility Regulator, an independent member and a deputy independent member. The Group also holds two licences as Interconnector Operator, one from the Commission for Regulation of Utilities ('CRU') and one from the Office of Gas and Electricity Markets ('Ofgem') in the UK.

In advance of each tariff period, we submit forecasts to the relevant regulatory authority. These cover customer demand, operating costs and other revenue requirements. Following a detailed review process, the regulators issue a formal determination of the allowable revenue that the business can recover.

As with any forecast, there can be variations between the projections and the actual revenue recovery, or cost out-turn. This can result in regulatory under or over recoveries. Any such under or over recoveries are adjusted for in the price determinations for subsequent periods. This can give rise to volatility in the reported statutory earnings of the Group. This is because accounting regulations do not permit results to be smoothed by anticipating under or over recoveries.

EirGrid TSO is operating under the 2015-2020 Price Control issued by the Commission for Regulation of Utilities in December 2015. SEMO is operating under the 2016-2019 Price Control, as published by the SEM Committee in August 2016.

SONI’s 2015-2020 Price Control was amended during the year to reflect the determination of the Competition and Markets Authority (CMA) findings following SONI’s appeal of the Utility Regulator’s earlier determination of that Price Control.

Revenues and Profitability

The Group’s revenue is primarily derived from regulated tariffs. The main revenue is the Transmission Use of System (TUoS) tariff. This is a charge payable by all users of the transmission systems in Ireland and Northern Ireland. We also earn a share of tariffs as Market Operator for SEM. Revenues are also derived from auction receipts for the sale of capacity on the East West Interconnector (EWIC).

Group revenue for the year to 30 September 2018 of €758.4m was €179.0m (30.9%) higher than the previous year, of which €105.5m was due to a higher imperfections tariff.

The profit before tax for 2018 was €65.8m. This is up from €3.4m in 2017, mainly as a result of higher demand related regulated tariffs collected during the year and lower than anticipated costs relating to new DS3 System Services arrangements.

Excluding the hand back of over recoveries for prior years, management’s estimate of the underlying operating profit for 2018 was €18.7m, subject to regulatory uncertainties.

EirGrid paid a dividend of €4.0m in June 2018 in respect of 2016/17. A dividend of €4.0m in respect of 2017/18 is proposed to be paid in early 2019.

Financing

The Group continues to be in a sound financial position. Its borrowings have long repayment dates and are fully hedged against interest rate fluctuations.

During the year EirGrid plc and SONI Ltd finalised €200m revolving credit facilities, effective 1 October 2018, to meet working capital requirements of the new I-SEM arrangements.

Key Financial Highlights €M

    All Other Activities EWIC Total
2018        
Revenue   698.3 60.1 758.4
Direct Costs   (572.2) - (572.2)
Other Operating Costs   (79.8) (23.5) (103.3)
Operating Profits   46.3 36.6 82.9
Finance Costs   (0.9) (16.2) (17.1)
Profit Before Tax   45.4 20.4 65.8

 

       
    All Other Activities EWIC Total
2017        
Revenue   549.6 29.8 579.4
Direct Costs   (446.7) - (446.7)
Other Operating Costs   (85.2) (25.7) (110.9)
Operating Profits   17.7 4.1 21.8
Finance Costs   (1.9) (16.5) (18.4)
Profit Before Tax   15.8 (12.4) 3.4

 

 

       

Operating Efficiently

Our role requires us to manage the flow of power on the grid to balance supply with demand, and to manage the market for wholesale electricity

This section of our annual report looks at how we manage the day-to-day operation of the grids. It also presents an overview of how we operate the electricity market for the island of Ireland.

Information Systems

EirGrid Group uses a suite of complex, interdependent IT systems to underpin our core functions. To assess the effectiveness of these critical systems, we measure their availability. EirGrid maintained this availability at 99%+ in 2018.

In 2018, we progressed to a service culture to ensure the smooth operation of the new SEM. This involved integrating a suite of new systems designed to operate the new SEM and all existing services.

We updated also our applications portfolio and the surrounding critical service metrics. Maintaining system stability at all times during this process was crucial.

To create the necessary flexibility, we modernised our approach to workforce management. As a top-class Information System (IS) service provider, we procured third-party services to deliver 24/7 on site IT support. We engaged a provider of ‘capacity’ services to increase our agility to source scarce skillsets. Managing our capacity ensures our IT resources can meet current and future business requirements.

Cyber Security

The security of our computer network and the electricity management system is of utmost priority. With this in mind, we invest in protecting our systems and in engaging our staff. EirGrid Group-designed cyber awareness campaigns and a new cyber security strategy play a key role here. This ensures our business is vigilant and aware of potential threats. This included the new regulations on EU Network Information Systems and GDPR.

Operating Efficiently

To make sure the lights stay on throughout the island, a team of staff operates the grids from the National Control Centres (NCCs) in Dublin and Belfast. The NCCs carry out the intricate task of matching electricity production to customer demand. Our main objective is to operate the transmission system in the most economical manner, consistent with safety, security, continuity, quality and environmental standards.

Market Structures for Security and Reliability

We want to make sure that the grid continues to operate securely and efficiently, while facilitating higher levels of renewable energy. To achieve this aim, we are working to obtain a range of services from market participants. These are called “System Services” and they help to stabilise the system. We implemented twelve System Services this year. These range from support provided within milliseconds of a disturbance, to responses which can be sustained for hours. System Services come from a range of new and existing technologies.

These include wind, demand side response, interconnectors and battery storage. The increases in flexibility of conventional methods such as gas units, will also deliver the benefits.

Weathering the Storm

Ireland and Northern Ireland faced many storms over the past year. Amongst these was Storm Ophelia, which set a record as the farthest east occurring major hurricane in the Atlantic Basin.

Such an event required major pre-planning and coordination. The management of control centre, communications and support staff ensured the system was secure. Our emergency communications team maintained regular contact with our key stakeholders. Large thermal generators, large customers, wind farms, energy regulators, and governmental departments were all regularly updated.

A key aspect of balancing the system involved the control of wind farms from our NCCs in Dublin and Belfast. This ensured the grid was balanced as demand levels and wind speeds changed throughout the storm.

Maintaining Security of Supply

Continuity of electricity supply is of critical importance to both domestic and industrial customers. In a highly competitive global marketplace, continuity of supply is crucial to attracting inward investment and ensuring economic growth, especially in the hi-tech sector. A changing generation portfolio with increased penetration of variable renewable generation on the island of Ireland makes it more difficult for EirGrid Group to maintain current high levels of security of supply. When compared with neighbouring systems like that of Great Britain, the system of Ireland and Northern Ireland is leading the way in resolving the complex technical challenges that integration of high levels of renewable generation present. Operational policies and procedures are reviewed on a continuous basis to ensure that the system on the island is operated securely in both jurisdictions.

System Faults

From time to time, faults can occur on the grid for a variety of reasons. To ensure continued supply of electricity to customers, we review all faults to ensure the least disruption to customers. Between 1 October 2017 and 30 September 2018, there were 74 faults on the EirGrid system. The total system minutes lost for the period, attributable to EirGrid, was 0.387. There were seven faults on the SONI system. The total system minutes lost for the period, attributable to SONI, was zero.

Imperfection Costs

Every year, the Single Electricity Market Operator (SEMO) recovers costs in relation to the operation of the grid. These imperfection charges are used to recover charges for constraints on the grid.

Following the implementation of various operational initiatives in 2018, the EirGrid Group has saved €15.3m in imperfection costs.

Delivering Grid Infrastructure

At EirGrid Group, one of our responsibilities is to make sure that the grid can meet the future needs of all electricity users

At EirGrid Group, one of our responsibilities is to ensure that the grid can meet the future needs of all electricity users. This sometimes requires us to develop new grid transmission infrastructure or to upgrade existing infrastructure.

We balance the need for future grid development against the concerns of those affected by such developments. That’s why we welcome innovations that make more use of existing infrastructure. This continues to be a key focus for the EirGrid Group.

We always assess the advantages of new technologies to ensure a reliable and secure electricity supply. To achieve this, we identify, research and trial potential new technologies.

We do this in partnership with industry, technology innovators and other grid operators. We also do this in consultation with members of the public.

Looking Ahead – Finding the Best Way to Develop the Grid

It is our responsibility to manage the transfer of power across the electricity grid. We forecast when and where electricity is needed; hour-to-hour, day-to-day, and year-to-year. We work to ensure there is enough electricity to allow industry and the public to prosper. We also keep the grid secure and reliable.

We review our grid development plans regularly. Our last major review in 2015 reflected the economic and energy demand forecasts of the time. It took into consideration also the objectives of local, national and European policy. This review reflected the changes that have occurred in the intervening period. Looking forward our draft strategy reflects a changed economic context. It also considers opportunities offered by advanced transmission technologies.

Scenario Planning

The factors that influence the future usage of the electricity grid are changing. The level of uncertainty surrounding each of these factors can be high.

In 2017 we introduced scenario planning as a way of developing the grid. This ensures that it continues to support all-island economic growth and expanding population in the face of an uncertain future. It helps also to maintain required levels of system safety, security and reliability over the long-term.

During 2017 and 2018, we published and ran a public consultation process on ‘Tomorrow’s Energy Scenarios’ (TES). This set out possible views of the future and outlined a range of ways that energy use may change.

The inaugural scenario development cycle, Tomorrow's Energy Scenarios 2017, came to an end in 2018. It culminated in the publication of the ‘Tomorrow's Energy Scenarios 2017 Locations report’ and the ‘Tomorrow's Energy Scenarios 2017 System Needs Assessment’. As part of this project, we developed four possible scenarios for Ireland in consultation with key stakeholders.

The stakeholders included government, energy research groups, industry representatives, and the public.

These reports analysed the arising long-term needs of the electricity grid out to 2040. Identifying long-term needs is a critical part of our grid development process. It provides us with a signpost to where we should develop the electricity grid. This allows us to meet the future needs of society.

Our next scenario development cycle, TES 2019, will include Ireland and Northern Ireland.

Multi-Year Delivery Programme

In July 2018, we developed the Multi-Year Delivery Programme (MYDP) for the years 2019 – 2023. This five-year plan details the delivery of all projects in the Government of Ireland’s Capital Plan.

The Multi-Year Delivery Programme (MYDP) allows EirGrid to plan for delivery in a coordinated manner. This creates greater confidence in commitment dates. These are commitment dates in relation to connection projects and associated transmission reinforcements.

SONI’s Grid Development Process

During 2018, the System Operator for Northern Ireland (SONI) began piloting the new Northern Ireland approach, “SONI’s Grid Development Process”. From 1 October 2018, all new projects will be undertaken with SONI’s new Grid Development Process.

New Connections

  • In 2018, 15 new wind farms were connected to the Grid, providing a total of 325 MW of renewable energy.
  • One new large demand customer was also connected in Q2 2018. This was facilitated through the energisation of a new 110 kV transmission substation and 2 km of new underground cable circuits.
  • Activation of the Kelwin Power Hybrid Wind Farm in Kerry into the existing Kilpaddoge 110 kV station was completed in July 2018. This involved the connection of a 37 MW wind farm, 2.6 MW in battery storage technology and 2 MW in diesel generation. This is the first project of its kind connected to the Irish transmission network.
  • In June 2018, the Ardnacrusha substation upgrades were completed. The substation was commissioned in 1929 when the Ardnacrusha Hydro-Electric Power Station was built as a starting point for the rural electrification scheme by the Irish Free State. This upgrade of the substation has made possible the continued supply of renewable energy from the power Ardnacrusha Power station and the further integration of new renewable energy sources into the network.
  • A new 400 kV electrical switching station was energised in Moneypoint generating station. This replaced the existing substation, built in the 1980s, which had reached its end of life. This now makes it possible to transfer power from the west to the east of the country via the 400 kV network.
  • The uprate of the Bellacorick – Castlebar 110 kV circuit and the Kilpaddoge – Knockanure 220 kV circuit was completed in 2018. This allows for significant extra renewable energy on the network. Uprating adapts existing infrastructure to increase capacity without adding new lines or cables.
  • The Cauteen – Tipperary 110 kV line was uprated and energised in September 2018. This project strengthened the 110 kV network between Limerick City and Tipperary. It allows the transmission of large amounts of renewable generation between these areas.
  • Curraghamulkin Windfarm in County Tyrone was energised in July 2018. This has added another 90 MW of renewable generation to the grid. The work involved constructing a new 110 kV substation (Drumquin Main), a 9.5 km overhead line and a switching substation (Dromore Main) to connect into the Omagh – Enniskillen overhead line.

A Sustainable Energy Sector

EU-SysFlex General Assembly in Lisbon, November 2018

Enabling the transition to a sustainable energy sector - being a force for positive environmental change

The electricity sector will play a key role in shaping a sustainable energy future. The EirGrid Group is developing many of the requirements to facilitate this shift.

National and EU policy aims to further reduce carbon emissions and increase the use of clean energy. As Transmission System Operators ('TSO's'), we must enable this change to meet binding policy targets. As we do so, we must always deliver the energy security that all electricity users expect.

EirGrid Group is a global pioneer in integrating renewable electricity on the grid. Our innovation allows for levels of wind generation that are world-leading.

Electricity from renewable sources like wind is not always available when needed. Much like all forms of electricity it’s also not easily stored. These characteristics create considerable challenges for all transmission grids. It required us to do things differently.

Integrating Renewables

Throughout 2018, we continued to enable the electricity grid to operate with unprecedented levels of renewable energy. This included over 600 MW of solar and wind farms known as Power Park Modules (PPM). These are an ensemble of generating units connected to the transmission network. The all-island Controllable Power Park Module capacity now stands at 4,276 MW (Wind: 4,162 MW, Solar PV: 114 MW).

We measure the amount of this type of renewable energy on the system using a value called System Non-Synchronous Penetration (SNSP). In March of this year, we increased this from 60% to 65%. This means that the system can operate safely and securely with almost two thirds of demand met by renewable generation at any given time. As a result, we have broken the record for the amount of wind generation on the island several times in the past year.

The target for renewable generation is 40% by 2020. In Northern Ireland, renewable sources accounted for 34.4% of electricity generation. In Ireland this was 29.9%. We are on track to meet the proposed 2020 target.

EU-SysFlex

In 2018, a project called EU-SysFlex showed recognition of our success at integrating renewable energy. EU-SysFlex is a consortium of European energy companies, led by EirGrid. It has been awarded over €20 million by the EU to fund research into the deployment of renewable energy.

This project allows us to share our world-leading experience of including more renewables on the grid. The project provides a great opportunity to learn from our European partners. It also allows us to influence European policy direction. Discussion topics have included the development of future scenarios and services for the European electricity grid.

Unlocking Flexibility from the Demand Side

Demand side management involves users of electricity having the capability to change their usage from their normal or current consumption patterns. It plays an important part in balancing generation and demand on the grid. This includes accommodating increased renewable electricity, along with providing capacity and delivering System Services.

At EirGrid we support the development of a Smart Grid. We have been involved in two projects this year looking to unlock the potential of residential demand. The first, ‘Power Off & Save’, was a pilot programme in partnership with Electric Ireland. This initiative encouraged energy conservation by domestic electricity customers.

EirGrid was also a partner on RealValue, a Horizon 2020 project. It aimed to realise the benefits of local small-scale thermal energy storage. Up to 550 units were installed, with real-life trials demonstrating the capability to deliver System Services. The lessons on potential opportunities and challenges are extremely useful.

We have also provided operation certification to aggregated generation units/demand side units. These are demand sites that can be instructed by EirGrid Group to reduce electricity demand. The all-island aggregator capacity now stands at 8.6% of system peak demand (483 MW of demand side units and 85 MW of aggregated generation units).

Being a Force for Positive Environmental Change

EirGrid Group itself has an important role in encouraging and making possible increased energy efficiency. Year on year, we have achieved an energy reduction of 3% for our Dublin sites. Across the group, energy usage can be broken down into electricity and fossil fuel. Our fossil fuel usage is mainly natural gas for heating.

In 2018, EirGrid consumed 3,680 megawatt-hours (MWh) of energy in our Dublin locations - Ballsbridge and Deansgrange. This energy use can be broken down as follows:

  • 2,949 MWh of electricity, and
  • 731 MWh of fossil fuels.

In 2018, SONI consumed 2,128 MWh of energy in our Belfast offices. This is broken down as follows:

  • 1,589 MWh of electricity, and
  • 539 MWh of fossil fuels.

We continue to find ways to reduce our own energy use. In 2018, these included installing LED lighting in stairways, communications rooms and the datacentre. We also incorporated new, more energy efficient computer room air conditioning units.

In 2019 we plan to continue to make refurbishments to the workspace’s Including refitting lighting to LED’s. This will also involve the replacement of the main chiller to a more energy efficient unit.

In the coming years, we expect to reap the energy efficiency rewards of these projects. This will put EirGrid on target to achieve the 2020 public-sector energy efficiency improvement of 33%.

Environmental Sustainability

Respect for the environment is a key aspect of the development and operation of the electricity grid. Electricity transmission infrastructure (overhead lines, underground cables, substations) interacts with many environmental factors. These include natural habitats, wildlife - especially birds - landscape and cultural heritage.

At EirGrid, we undertake Strategic Environmental Assessments and Natura Impact Statements of our grid implementation plans every five years. This process ensures that environmental considerations are integrated into the preparation of plans.

In 2018, we consulted on the draft ‘Grid Implementation Plan’ (GIP) for grid development between 2017 and 2022 and associated Strategic Environmental Assessments and Natura Impact Statements. The GIP integrates Ireland’s Grid Development Strategy and identifies those parts of the country that need investment in the grid. It also highlights the issues, policies and objectives that will be employed.

Earning Respect and Trust

Agricultural Liaison Officer, Fergal Keenan, meets members of the public at the Balmoral Show

Engaging with our stakeholders, our communities and our people

EirGrid Group is committed to being a socially responsible business. We aim to do this across all our relationships. That includes relationships with customers, stakeholders, employees and the wider community.

Being a responsible business

In 2018, we developed a new corporate social responsibility (CSR) strategy. We based this strategy on five pledges for excellence.

We carried out activities as part of a three-year programme underpinning it. Activities included:

Principles: Communicating our CSR strategy on both the EirGrid and SONI websites

Power: The ‘Power Off & Save’ programme. This educates consumers on the options that EirGrid uses to manage the grid

Preservation: EirGrid committed to reducing our Scope 1 and Scope 2* greenhouse gas emission intensity by 50% by 2030. We did this by signing the Business in the Community Ireland Low Carbon Pledge

Positivity Through our partnership with Book Trust NI, SONI sponsored 1,000 book packs for students. We also held events in 2018 for families in the Armagh and Garvagh areas; and

People: As part of our diversity focus, International Women’s Day activities took place in SONI and EirGrid

Employees

We are committed to being a trusted and respected organisation. To achieve this, we support and develop our staff with training opportunities. This ensures they develop to the best of their ability.

In 2018, we enhanced our leadership approach in a manner that reflects the values and behaviours set out in our strategy. To do this we designed a series of leadership masterclasses for our managers. This takes into consideration 360-degree feedback, manager insights and executive input. The leadership masterclasses are an investment in preparation for our managers to lead the company into the future.

The existing Group EirSkills development programme continued to evolve. Reflecting our business development, EirSkills provides development opportunities across a range of competencies. Additionally, we facilitated opportunities to allow staff to learn and grow outside the Group. This included working with external bodies such as the European Network of Transmission System Operators for Electricity (ENTSO-E) and the Australian Energy Market Operator (AEMO).

This year, our staff recognition programme ‘Going the Extra Mile’ received a number of very high standard nominations at all levels. As part of this programme, there have been numerous excellent examples of staff demonstrating the behaviours that reflect our values.

In September 2018, EirGrid Group held a series of ‘Wellness Week’ initiatives. Physical and mental wellbeing, as well as driving and cycling safety were the focus. Additionally, EirGrid Group teamed up with a workplace wellness provider to conduct a company challenge. This app-based challenge focused on exercise and movement. The series of workshops, initiatives and guest speakers received a tremendous response from staff.

Promoting an inclusive and diverse workforce

At EirGrid Group, we recognise and celebrate the contribution of a diverse workforce. Creativity, innovation, diversity of thinking and difference in perspectives all help us to meet our goals. This year our men and women celebrated International Women’s day through a series of events hosted in Dublin and Belfast. We designed these events to celebrate the participation of women in our organisation. As a corporate partner of Professional Women’s Network (PWN) Dublin, EirGrid hosted an event with members of the business community. We based our discussion on how to set ourselves up to succeed, this time focusing on ‘Raising Your Profile.’

This year, EirGrid Group held a series of assessment centres to select the 2018/2019 graduates. To secure bright talent for the future, we aim to recruit graduates from a wide range of disciplines. EirGrid Group partnered with occupational psychologists to assess prospective graduates. This involved group discussions, case study presentations and competency interviews.

Communities

The new CSR strategy identified education and community infrastructure as key focus areas. Below we have outlined our education support throughout 2018.

Continued work with the Margaret Aylward Community College in Dublin. Our staff members helped students to develop CVs, carry out mock interviews, and to learn about working in an office environment.

Our STEM (Science, Technology, Engineering and Maths) support included sponsorship of an electricity-related lesson in a secondary school teaching pack. This innovative resource published by ‘Science and Technology in Action’ contains industry-related content developed by leading STEM organisations.

We held a Business in the Community Northern Ireland ‘Work Inspiration Programme’ workshop. Fifteen students from eleven secondary and grammar schools across Northern Ireland attended. This programme aims to inspire students to work in particular careers through showcasing a company in that sector.

We continued our work with the ‘School Digital Champion Programme.’ This was in partnership with the Department of Communications, Climate Action and Environment. As part of this programme, 13 students visited us to learn about the ways that we utilise technology across the business.

Females in STEM’ – We sponsored an Irish Girl Guides Lego robotics camp attended by 25 girls. We also participated in a Women in STEM promotional campaign with the Irish Independent.

EirGrid Group also financially supported community organisations across Ireland and Northern Ireland. These includes Moyvane Development Association, Farney Community Development Group, Women’s Fund for Northern Ireland and Lighthouse Belfast.

We launched the EirGrid Knockanure-Duagh Community Fund of €70,500 in North Kerry. As part of this, we invited funding applications from local community groups.

Our people continued to support worthwhile causes. This included support for ElectricAid – the social justice and development fund run by EirGrid and ESB staff.

Staff in EirGrid also carried out fundraising events to support Our Lady’s Hospice and Care Services in Harold’s Cross, Dublin. As part of this, we organised a Carols by Candlelight fundraising event with the EirGrid choir, Transmission Amp. Similarly, staff in SONI participated in the World’s Biggest Coffee Morning in aid of MacMillan Cancer Support.

Sponsorships

EirGrid Group carried out a number of sponsorships in 2018. The aim of these activities is to raise awareness and understanding of what we do. It’s important for us to earn the respect and trust of the wider public while giving something back.

2018 was the third consecutive year of the EirGrid GAA Football Championships. This year saw the Championship restructured from a U21 competition to an U20 competition. EirGrid continued to be the Official GAA Timing Sponsor.

In Northern Ireland, we continued our sponsorship of the Ulster Rugby Premiership. We also sustained our sponsorship of the SONI Community Rugby Champions Award. This recognises volunteers at club level throughout the province.

A New Electricity Market for a Sustainable and Secure Future

For the past decade, we have successfully operated the wholesale electricity market across the island of Ireland

Electricity has all the characteristics of a basic need. It is used in our homes, our schools, our workplaces and our hospitals. With this in mind, we have little if any tolerance for interruption of supply. Our role as Transmission System Operator (TSO) is to maintain a reliable supply of electricity to meet demand across the island of Ireland. As the Independent Market Operator, we are also responsible for the effective operation of the electricity wholesale markets. These markets offer a trading platform for buying and selling electricity.

The Changing Face of the Electricity Market

Since 2007, EirGrid Group has operated the wholesale electricity market on the island of Ireland, the Single Electricity Market (SEM). We have endeavoured to fulfil this role to the highest possible standard. We adopt an approach that embraces innovation and harnesses new technology. We do this for the benefit of our customers and electricity users.

Much has changed since the SEM was introduced in 2007. In particular, there is now more generation from renewable sources across the island. The publication of the Third Package for Energy by the EU Commission set out the ambition for greater integration of electricity markets across the EU. Among other drivers, this necessitated the transition to a new Single Electricity Market (SEM).

The I-SEM project is now complete and the new SEM went live on 30 September 2018. Its delivery represents the largest change for the all-island energy industry since the establishment of the SEM in 2007. It replaced the existing market arrangements with multiple markets across Europe.

Adapting to Change - Getting ‘Operationally-Ready’ for the new SEM

Between the fourth quarter of 2017 and the third quarter of 2018, we made the final preparations to deliver the new electricity market. This followed a period of extensive consultation, planning and design.

In December 2017, the first capacity auction for the new SEM took place. The key objective of the new SEM is to deliver a more competitive electricity generation market. Capacity represents the need to have adequate electricity generating resources to ensure that the demand for electricity can be met at all times.

As part of the new SEM, we continue to collaborate with our key partners and stakeholders. These include the regulatory authorities in Ireland and Northern Ireland and our market participants. We also liaise with relevant government departments in each jurisdiction.

Benefits of the New SEM

Integration with the wider European market enables more efficient cross-border trading. The new SEM also facilitates new technologies, including renewable generation and demand side response. This is to ensure a greener and more secure and sustainable future. The new SEM also provides for more active supplier participation. Additionally, we now have a competitive market for capacity. A more open market leads to greater competition and downward pressure on prices to the benefit of all electricity consumers.

The advent of the new SEM brings fundamental change for the market operator function. Our role as the Single Electricity Market Operator (SEMO) is evolving. It will now incorporate energy balancing and capacity settlement arrangements. Essentially, this is a mechanism to ensure that electricity supply on the Island continues to meet demand. We have also undertaken a new function as a Nominated Electricity Market Operator (NEMO) under a contractual joint venture between EirGrid plc and SONI Ltd called SEMOpx. This will deliver day-ahead and intraday energy trading facilities and represents an exciting new opportunity for us.

Day-ahead trading describes the process in which agreements are made between a seller and a buyer for the supply of electricity for the following day. Additional trading that takes place after the day-ahead market has cleared is generally known as intraday trading.

Throughout 2018, we continued to provide expert analysis and support to industry participants. We will continue engagement with industry on market design and rules and continue to develop our market operations throughout 2019. We are committed to delivering the best possible trading processes and systems.

Working Towards Greater European Integration

The transition to the new SEM is driven by European energy policy. The third legislative package on energy created common rules on the cross-border transmission of electricity for European electricity markets. Going forward, we will continue to integrate European-driven initiatives. This includes XBID, the common cross-border intraday trading solution which is a key component of the energy market. We will also implement the arrangements aimed at integrating balancing markets across Europe.

We will further advance towards a de-carbonised and secure energy future. A key aspect of this will be increasing diverse and environmentally friendly technologies. In line with government targets, we will do this in collaboration with industry. Ongoing engagement on the ‘Guarantees of Origin and Fuel Mix’ disclosure processes including the ‘Green Source Product Verification’ process will continue. A Guarantee of Origin is an electronic document issued to a producer of electricity generated from renewable energy sources.

The future of energy on the island is full of challenges and opportunities. We are committed to embracing innovative solutions wherever possible. We will continue to engage and partner with stakeholders and customers to this end.

Interconnection

A shining example of our partnership approach is the proposed Celtic Interconnector. This is a planned undersea electricity link connecting Ireland and France. An important European Union Project of Common Interest, the project completed the Feasibility phase in 2016 with the project currently in the Initial Design & Pre-Consultation Phase. If undertaken, this interconnector will help security of supply, competition and the efficient use of renewables. During 2018, we continued the development of the project in partnership with RTE (Réseau de Transport d’Électricité), our French counterparts.

In September 2018, EirGrid and RTE submitted an investment request to the Irish and French regulators. Within this, the national regulators are requested to make a decision on a ‘Cross Border Cost Allocation’ for the project. A decision on approval for inclusion of the project in each country’s tariffs was also requested. We expect decisions in April 2019. EirGrid and RTE then expect to make an application in 2019 for grant funding under the EU Connecting Europe Facility (CEF).

In parallel with this, the development of the actual project continued throughout 2018. This included further marine assessments, onshore assessments and consultation with the public. EirGrid and RTE are also preparing for the procurement process. This will seek to appoint contractors for the ‘Engineering, Procurement and Construction’ (EPC) of the interconnector should the project proceed.

East West Interconnector

EirGrid owns and operates the East West Interconnector. This links the grids in Ireland and Great Britain. It helps provide a safe, secure, reliable and affordable energy supply for both systems. In 2018, this interconnector continued to provide a Black Start service to the Grid in the UK and Ireland.

We use Black Start services to restore power in the unlikely event of a total or partial shutdown of the electricity transmission system. This ensures security of supply for the UK and Ireland. As part of the DS3 programme, we completed a technical upgrade of the interconnector. This supports its ability to respond as more renewable generation is delivered.

DS3, ‘Delivering a Secure, Sustainable Electricity System’ is an EirGrid initiative designed to ensure the secure operation of the grid while achieving renewable energy targets.

Throughout 2018, the interconnector business transitioned to the SEM market arrangements. In August 2018, EirGrid launched a range of East West Interconnector capacity products on the Joint Allocation Platform (JAO). The sale of interconnector capacity in the EU provides transparent and long-term prices. This helps support the successful operation of the SEM market.

North South Interconnector

The North South Interconnector project will provide a second high-capacity electricity interconnector between the two transmission systems on the island of Ireland. This will deliver benefits to householders, communities, businesses and the economy.

It will do this by improving competition in the wholesale electricity market. By improving the efficiency of the Single Electricity Market, it will also enhance the security of electricity supply throughout the island of Ireland. This is essential for economic growth, the creation of jobs and improving the standard of living and quality of life for all. It will also facilitate the connection of more renewable generation right across Ireland. This will help to reduce our production of greenhouse gasses and our reliance on imported fossil fuels. We estimate that these benefits will save electricity users at least €20 million in its first year of service. This will rise to over €40 million per annum by 2030.

We received planning approval in December 2016 for the southern section of the interconnector and in January 2018 for the northern section. The project is currently the subject of ongoing legal challenges in both jurisdictions.

Throughout 2018, we have continued with our landowner and community engagement programme. We are also working with our project partners to ensure that construction can commence once full development consent is achieved.

Testimonial

Juan Perez, Director Strategy, European Power Exchange

The European Power Exchange (‘EPEX SPOT’) has supported the EirGrid Group (‘EirGrid’) in the transition to a new competitive market model for the new SEM, making it compliant with the European Regulations. We are proud of having worked together to deliver a seamless integration of the all-island electricity market with the European electricity market.

In 2016, EirGrid conducted a competitive procurement process that selected EPEX SPOT to manage and operate the trading systems for the day-ahead and intraday markets as part of the new SEM. The project phase was initiated soon afterwards and concluded with the successful operational go-live of the new SEM on 30 September 2018. During this 2+ year period the project naturally encountered external dependencies, as well as technical and regulatory challenges. We have successfully overcome these challenges together, thanks to the cooperative spirit between EirGrid and EPEX SPOT. EPEX SPOT values the innovative, pragmatic and entrepreneurial spirit of the people working at EirGrid. The professionalism of EirGrid staff has been key for the success of the project.

Market participants registered with SEMOpx have access to a wide range of trading opportunities, locally and in connection with Great Britain. The clearing and settlement solutions that SEMOpx offers in cooperation with European Commodity Clearing (ECC) are also highly reliable and secure.

EPEX SPOT leads market integration projects in Europe and provides turnkey services, allowing EirGrid to offer an array of highly reliable spot market solutions (market operations and trading systems) that are coupled to Great Britain and to the European electricity market coupling solutions.

All Island Energy Growth Rates
Import Capacity Auction Price: Monthly vs Annual Prices
Average Electricity System Marginal Price Compared to Gas Price
Export Capacity Auction Price: Monthly vs Annual Prices

John O'ConnorChairman

John O’Connor was appointed Chairperson of the Board of EirGrid with effect from 12 November 2013. From 2000 to 2011, he was the Chairperson of An Bord Pleanála, the independent national tribunal for the determination of planning appeals and strategic infrastructure projects.

Prior to that, he served for 35 years as a civil servant in the Department of the Environment where he occupied senior positions as Finance Officer, Principal Housing Policy and Finance and Assistant Secretary in charge of the Planning and Water Services Division.

He has also served as director of three commercial State Bodies: the Housing Finance Agency, Temple Bar Properties and the Dublin Docklands Development Authority. He is also the Chairperson of the Pyrite Resolution Board. He holds a Diploma in Public Administration from UCD.

Mark Foley Chief Executive

Mark Foley joined EirGrid Group as chief executive in June 2018, having held the role of Managing Director of Land Solutions in Coillte since January 2016. Previous to that, Mark was Managing Director of Coillte Enterprise where he led the development of new businesses in renewable energy, telecommunications, land development and land sales.

Before that, from November 2000 to August 2008, Mark was Director of Capital Programmes at Dublin Airport Authority. In this role he was responsible for master planning, permitting, planning and delivery of c. €1.5bn in airport infrastructure at Dublin, Shannon and Cork airports. Prior to that Mark held a number of senior executive roles with multinationals in the Speciality Chemicals and Electronics sectors. Mark has a Bachelor of Chemical Engineering Degree from University College Dublin, a Masters in Industrial Engineering from University College Dublin and has attended executive development courses in Penn State University and IMD.

Dr. Theresa Donaldson Deputy Chairperson & Board Member

Dr. Theresa Donaldson achieved Chartered Director status with the Institute of Directors in 2018. She was Chief Executive of Lisburn & Castlereagh City Council (June 2014-September 2018) and Chief Executive of Craigavon Borough Council (2010-2014).

Prior to this Theresa held several senior management positions in health and social care and legal services in NI including as Director of Policy and Civil Service Delivery in the Northern Ireland Legal Services Commission. Theresa held a public appointment as Chair of a Health and Social Services Research Ethics Committee for six years (2004-2010) and a Judicial Appointment as a Lay Member of the Charity Tribunal (2012-2014).

Shane Brennan Board Member

Shane Brennan is an engineering graduate from the University of Ulster, holds a post graduate diploma in Environmental Engineering from Trinity College Dublin and is a member of Engineers Ireland. He has over 20 years of engineering experience and commenced employment with EirGrid in 2008 as a Project Manager in Grid Development. He is currently the Project Manager for the Northern Ireland element of the North South Interconnector project and has represented the company at many public engagements throughout Ireland and Northern Ireland.

Lynne Crowther Board Member

Lynne is a communications consultant, providing guidance and mentoring on social media strategy, implementation and training. She has worked on local, national and international initiatives for companies including: Coca-Cola Europe, National Trust, RAIN (Replenish Africa Initiative) Deloitte, Translink, Belfast City Council, Antrim & Newtownabbey Council, Derry City Council and Red Cross. She is a Board member of the Consumer Council for Northern Ireland and writes an award winning blog.

John Trethowan Board Member

John Trethowan is a native of County Down, and is married with one son. John is a career Banker, and is currently the Head of the Credit Review Office which provides an appeals mechanism for Small Businesses and Farms which have been refused bank credit in Ireland. He has extensive Boardroom experience in Banking, Public Transportation and Public Healthcare.

Michael HandBoard Member

Michael Hand was appointed to the EirGrid Board in July 2015 for a period of five years. Michael has extensive experience over 30 years as a senior leader in the consulting engineering and construction sectors in Ireland and latterly as CEO and Director of Grangegorman Development Agency.

During his career he has played a lead role in the growth and development of PH McCarthy Consulting Engineers, a leading multidisciplinary business as Director, Managing Director and Executive Chairman. Following the merger of the business with WYG Group plc he was Managing Director of the WYG Engineering Ireland business for 3 years before joining GDA in 2010. He has a track record in the design and delivery of major strategic infrastructure projects throughout Ireland.

Michael is highly qualified in engineering and business and is a Chartered Engineer, a Chartered Director and a Chartered Water & Environment Manager. He holds a degree in Civil Engineering and a Masters in Business Administration. In 2014, he was conferred with a Honorary Doctorate by DIT in recognition of his contribution as an engineer, a public servant and as a servant to his community. He is a Fellow of four professional institutions.

Eileen Maher Board Member

Eileen is an experienced strategic advisor having spent the past 30 years in the telecoms industry. She has strong strategic, commercial, transformation, regulatory and legal experience. She has a track record for developing and executing key strategic initiatives and a history of negotiating commercial joint ventures, partnerships and acquisitions. She was the Director of Strategy and External Affairs in Vodafone. She is also a member of the Compliance Committee of the Broadcasting Authority of Ireland.

Tom Coughlan Board Member

Tom Coughlan has extensive senior management and leadership experience having retired as Chief Executive of Clare County Council following a career in local government. He has wide experience of the public sector having served as chairman of various committees and boards at national and local levels.

Tom is the Chairperson of the Health and Safety Authority and non-executive Director of Fáilte Ireland. He is a lay member of the Complaints and Client Relations Committee of the Law Society of Ireland, an Associate Tutor with the Institute of Public Administration, and a member of the Institute of Directors of Ireland.

Tom FinnBoard Member

Tom Finn was appointed Company Secretary of EirGrid and its subsidiary companies in October 2016. He also holds the role of Head of Legal for the EirGrid Group. He is an experienced practicing lawyer with over 30 years post-qualification diverse legal and senior management experience within private practice, industry and the public sector. At various stages of his career, Tom has been a practicing Barrister, In-House Lawyer, Solicitor and Legal Manager. He holds a Diploma in Corporate Governance from the Law Society of Ireland.

Liam O'HalloranBoard Member

Liam O’Halloran has extensive senior management experience in multinational electronic and telecommunications companies. Liam previously held the position of Senior Vice President of DEX Europe, a US based company providing repair and logistics services to major electronics multinationals and Vice President of European Operations for Jabil Global Services, a global electronics services company.

Liam was also Director of Customer Operations and Regulation at Magnet Networks and later served as Executive Chairman of ALTO, the Association of Alternative Telecommunications Operators. He is a Director of Alcomis, a company development consultancy with clients in Software, eLearning and Services sectors.

Mark Foley Chief Executive

Mark Foley joined EirGrid Group as chief executive in June 2018, having held the role of Managing Director of Land Solutions in Coillte since January 2016. Previous to that, Mark was Managing Director of Coillte Enterprise where he led the development of new businesses in renewable energy, telecommunications, land development and land sales.

Before that, from November 2000 to August 2008, Mark was Director of Capital Programmes at Dublin Airport Authority. In this role he was responsible for master planning, permitting, planning and delivery of c. €1.5bn in airport infrastructure at Dublin, Shannon and Cork airports. Prior to that Mark held a number of senior executive roles with multinationals in the Speciality Chemicals and Electronics sectors. Mark has a Bachelor of Chemical Engineering Degree from University College Dublin, a Masters in Industrial Engineering from University College Dublin and has attended executive development courses in Penn State University and IMD.

Siobhan ToaleDirector, Human Resource & Corporate Services

Siobhan Toale was appointed Director of Human Resources & Corporate Services in July 2015 having previously held the position of Director of Human Resources since joining EirGrid in 2013. Siobhan has extensive HR, Leadership Development and Change Management experience from the Telecommunications and Banking Industries. She has previously held senior HR positions in eircom, Telefonica 02 Ireland and Bank of Ireland Group. Siobhan has a BSc(Comp) from Trinity College Dublin and an MSc in Organisational Behaviour from Birkbeck College, University of London.

Rodney DoyleDirector, Market Operations & General Manager, SEMO

Rodney Doyle was appointed Director of Market Operations and General Manager, Single Electricity Market Operator (SEMO) in July 2015 having previously held the position of Director of Information Services since February 2013. Rodney also held a number of other positions in EirGrid including European Market Integration Manager; Manager of the East West Interconnector business readiness project, and Ancillary Services Manager. Rodney has across his roles led projects to deliver major systems and policies which are in use today across the electricity market and the TSO's. Before his time with EirGrid and ESB National Grid Rodney worked as the chief adviser in the networks division of the Competition Authority of New Zealand concentrating on electricity and gas regulation/market design issues and before that worked in consultancy. Rodney is a member of a number of key European TSO and market cooperation groups. Rodney has a BA (Economics), MA (Economics) and an MBA from UCD.

Liam RyanInterim Executive Director, Grid Development & Interconnection

Liam Ryan was appointed Interim Director of Grid Development & Interconnection in November 2018. Prior to this, Liam was head of the Integrated Single Electricity Market transition, responsible for the overall readiness, transition and deployment of the market solution, which fully integrated the Single Electricity Market to Europe. Liam also held a number of other positions in EirGrid including Head of Transmission Engineering & Maintenance, Head of Market Operations, Head of Power System Operational Planning and Head of Programme Management Office for developing the transmission grid. In all cases he lead the development of policies and innovations which are central to the performance of the market and system operator functions. Before joining EirGrid, Liam held a number of senior engineering roles in Hewlett Packard manufacturing and innovation departments and before that worked in consultancy. Liam is a member of a number of key European TSO corporation groups. A graduate of Trinity College Dublin, he has a PhD and Bachelor of Mechanical Engineering and holds a Masters in Mathematics.

Robin McCormickDirector, Operations, Planning & Innovation and General Manager, SONI Ltd.

Robin McCormick was appointed Director of Operations, Planning & Innovation in July 2015 and is also the General Manager of SONI Ltd. Robin previously held the role of General Manager of the Single Electricity Market Operator (SEMO) and SONI.

He has significant experience in the power industry in a regulated utility environment. In his role as Director, he is responsible for the operation and planning of the power system in Ireland and Northern Ireland, Robin is a fellow of the Institution of Engineering and Technology and Vice Chairman of the IET Engineering Policy Group – Northern Ireland. He holds an MBA from the University of Ulster, Jordanstown, and an MSc from Napier University, Edinburgh.

Aidan SkellyDirector, Finance & Legal

Aidan Skelly was appointed Director of Finance & Legal in July 2015. Aidan previously held the position of Chief Financial Officer since June 2005. He was formerly Finance Director with Waterford Stanley Limited.

He worked with Waterford Crystal from 1987 to 2002, during which time he held a number of finance and commercial positions in Ireland and in the UK. He trained as a Chartered Accountant with PricewaterhouseCoopers and is a Commerce graduate of University College Dublin. He also holds an MBS from Dublin City University.

Rosemary SteenDirector, External Affairs

Rosemary Steen was appointed Director of External Affairs in July 2015 having previously held the position of Director of Public Affairs since joining EirGrid in 2014. Rosemary also serves on the board of the AsIAm charity organisation.

Rosemary has extensive Corporate Affairs, Government Relations and Corporate Social Responsibility experience from the Telecommunications, Utilities and Business Industry Body sectors.

She has previously held senior positions in Vodafone, Shell and IBEC. Rosemary has a BA in Economics and Philosophy from Trinity College Dublin, an MBS in Logistics and Manufacturing from University College Dublin and a Postgraduate Diploma in Legal Studies from Dublin Institute of Technology.

Tom FinnCompany Secretary

Glossary of Technical Terms

An explanation in plain English of some of the technical terms used in this Annual Report.

AEMO

Australian Energy Market Operator performs an array of gas and electricity market, operational, development and planning functions.

An Bord Pleanála

Ireland’s independent national planning authority.

Black Start

This is a procedure used to restore power to all or part of the electricity grid, using sources from outside of the area experiencing a power failure.

Capacity

The amount of electricity that can be safely transferred on the system or a circuit.

CRU

The Commission for Regulation of Utilities. This institution regulates our activities in Ireland.

Circuit

The overhead line or underground cable linking two substations. For example, the Moneypoint – Dunstown 400 kV circuit.

Conductors

An object or material that can transfer electricity. For example some metal wires are good conductors of electricity. Conductors are found in underground power cables and overhead lines.

Conventional generation

The generation of electricity using fossil fuels, such as natural gas, coal or peat.

Converter Station

See “Substation”.

CSO

Central Statistics Office is the national statistical office of Ireland.

Day ahead trading

When contracts are made between seller and buyer for the generation and supply of electricity the following day. After the transition to the new SEM, a new division of SEMO will operate the day-ahead market for electricity in Ireland and Northern Ireland.

Data centre

A large group of networked computer servers used for remote storage of information.

Demand

The amount of electrical power that is drawn from the network by those who use electricity. This may be talked about in terms of ‘peak demand’, which is the maximum amount of power drawn throughout a given period.

Distribution Network

This is the lower voltage network, owned and operated in Ireland by the ESB and in Northern Ireland by NIE Networks. It delivers power from the transmission network to households and businesses.

DS3

‘Delivering a Secure, Sustainable Electricity System’ is an EirGrid initiative designed to ensure the secure operation of the grid while achieving renewable energy targets.

Energised

When a newly completed line or cable is fully operational and made a working part of the electricity grid.

ENTSO-E

An acronym for the European Network of Transmission System Operators for Electricity. This is the representative body for Transmission System Operators across Europe.

ESB

Electricity Supply Board is a commercial semi-state organisation in Ireland. This group of companies includes ESB Networks, who operate the electricity distribution system in Ireland.

GDPR

GDPR stands for General Data Protection Regulation and it came into effect on 25 May 2018. It replaced the Data Protection law in Ireland and the EU. GDPR relates only to ‘Personal Data’ and is legally binding for EirGrid and all organisations processing personal data in the EU.

Generator

A facility that produces electricity. Power can be generated from various sources, for example, coal, gas and wind.

Generation Capacity

This is the maximum amount of electricity available to be generated, based on the output potential of electricity generators connected to the grid.

Generation Dispatch

The amount of electricity being produced for the grid by a number of generators at any one time. This will vary as demand for electricity and the amount of renewable energy on the system changes.

Grid

See Transmission Network.

IDA Ireland

Industrial Development Agency (Ireland) is responsible for attracting foreign direct investment to Ireland.

Intraday trading

Also known as day-trading, this is a form of trading where the transaction must be completed on the same day as the contract is made. In the electricity markets, this means supplying an agreed amount of electricity at an agreed price on the same day as the agreement was made. After the transition to new SEM, a new division of SEMO will operate the intraday market for electricity in Ireland and Northern Ireland.

Kilovolt (kV)

Operating voltage of electricity transmission equipment. One kilovolt is equal to one thousand volts. The highest voltage on the Irish transmission system is 400 kV.

Megawatt (MW)

A megawatt is 1,000,000 watts. A watt is the standard unit of power (See below for a definition of Watt).

MYDP

The Multi-Year Delivery Programme (MYDP) is a five year plan detailing the delivery of all projects in the capital programme in Ireland with the objective of ensuring a realistic delivery pipeline for a multi-year programme of projects.

NEMO

Nominated Electricity Market Operator. Each territory in Europe has a NEMO, as designated by their respective energy regulator. The NEMO is responsible for running day-ahead and intraday trading for that electricity market. There can be more than one NEMO serving each territory, as its functions are open to competition. These are commercial services, and are separate from the essential market services required to maintain a functioning electricity market.

PCI

Projects of common interest (PCIs) are key cross border infrastructure projects that link the energy systems of EU countries. They are intended to help the EU achieve its energy policy and climate objectives: affordable, secure and sustainable energy for all citizens, and the long-term decarbonisation of the economy in accordance with the Paris Agreement.

Reinforcement

Increasing capability on the existing electricity grid by building new infrastructure or upgrading existing equipment.

Renewable generation

The generation of electricity using renewable energy, such as hydro, wind, solar, tidal and biomass.

Réseau de Transport d’Électricité (RTE)

Electricity Transmission System Operator of France. It is responsible for the operation, maintenance and development of Europe’s largest electricity grid.

SEM

The Single Electricity Market. This market comprises both the Ireland and Northern Ireland. It allows for electricity to be traded and supplied on an all-island basis.

SEMO

Single Electricity Market Operator. This is the EirGrid Group joint venture that runs the Single Electricity Market of Ireland and Northern Ireland. It carries out the essential services required to maintain a functioning market for wholesale electricity.

Smart Grid

An electricity grid that uses information and communication technology and new transmission technology to enable electricity generation and consumption and power flows to be monitored and controlled in real time.

SONI

System Operator for Northern Ireland. This organisation is part of the EirGrid Group. It manages, operates and develops the electricity transmission grid in Northern Ireland.

Stakeholders

These are individuals or organisations that may be affected by, or can influence, the operations of EirGrid Group companies.

Substation

A set of electrical equipment used to interlink circuits and change the voltage being sent down a line or cable.

System Non-Synchronous Penetration (SNSP)

SNSP measures the largest possible proportion of renewable electricity that the grid can accommodate.

Transmission line

A high-voltage power line running at 400 kV, 220 kV or 110 kV on the Irish transmission system. The high-voltage allows delivery of bulk power over long distances with minimal power loss.

Transmission Network or Grid

This is the network of around 6,800 km in Ireland and 2,200km in Northern Ireland of high-voltage power lines, cables and substations. It links generators of electricity to the distribution network and supplies large demand customers. In Ireland, it is operated by EirGrid and owned by the ESB. In Northern Ireland, it is operated by SONI and owned by NIE Networks.

Transmission System Operator (TSO)

The organisation responsible for operating the high-voltage electricity system in a particular region.

UR

The Utility Regulator. This institution regulates our activities in Northern Ireland.

Voltage

Voltage is a measure of the potential strength of the flow of electricity – similar to ‘pressure’ in a water system. Voltage is the measure of electrical charge or potential between two points (in an electrical field) such as between the positive and negative ends of a battery. The greater the voltage, the greater the potential flow of electrical current.

Watt

A watt is the standard unit of power in the International System of Units (SI). A watt measures the rate at which energy is produced or consumed. For example, a high-watt electrical appliance will consume more energy than a low-watt appliance.

Financial Statements

Directors' Report

The Directors present their annual report and the audited Financial Statements of the Group for the financial year ended 30 September 2018.

Principal Activities

The Group’s principal activities are to deliver quality connection, transmission and market services to generators, suppliers and customers utilising the high voltage electricity system in Ireland and Northern Ireland. EirGrid plc also has the responsibility to put in place the grid infrastructure required to support the development of Ireland’s and Northern Ireland’s economies. The Group is also responsible for the operation of the wholesale electricity market for the island of Ireland. The Group owns and operates the East West Interconnector (“EWIC”) linking the electricity grids in Ireland and Great Britain.

The Group collects tariffs to support these activities. These tariffs allow for incentives and a regulated return for capital invested in the business, generating value for the Group over the longer term.

Results and Review of the Business

Details of the financial results of the Group are set out in the Consolidated Income Statement on page 77 and the related notes 1 to 28.

The current period being reported on is the financial year ended 30 September 2018. The comparative figures are for the financial year ended 30 September 2017. The impact of EWIC on the Consolidated Income Statement has been split out to aid comparability. Further detail on EWIC is included in Note 7 including the impact on current financial year reported profit.

The Group invested further significant resources in the Integrated Single Electricity Market (“I-SEM”) project, both financial and non-financial. The I-SEM is the wholesale electricity market for the island of Ireland. The I-SEM went live at 11pm on 30 September 2018 and replaced the Single Electricity Market. Resettlement will continue in the Single Electricity Market until October 2019. The market go-live is the start of new, more competitive trading arrangements and has been achieved by intensive efforts from regulators, transmission system operators (“TSO’s”) and market participants. It will make best use of all the power on the system and ensure that interconnectors operate in the most efficient way. For consumers too, the I-SEM provides potential benefits for security of supply, increases competition and choice and ensures that consumers get the full benefit of the continued growth in renewable generation and should help place a downward pressure on prices.

Commentaries on performance during the financial year ended 30 September 2018, including information on recent events and future developments, are contained in the Chairperson’s Report and the Chief Executive’s Review.

Corporate Governance

The Group is committed to maintaining the highest standards of corporate governance. During the year the Group was compliant with the Code of Practice for the Governance of State Bodies (“the Code”) issued by the Department of Public Expenditure and Reform in August 2016. The Code sets out the principles of corporate governance which the Boards of State Bodies are required to observe.

The Group also complies with the corporate governance and other obligations imposed by the Ethics in Public Office Act, 1995 and the Standards in Public Office Act, 2001. The Group also has regard to the principles of the UK Corporate Governance Code revised in July 2018 and the Irish Corporate Governance Annex issued in December 2010.

During the year the Group incurred travel costs in Ireland and Northern Ireland of €1.1m (2017: €1.1m) and overseas travel costs of €0.4m (2017: €0.6m). Settlement and related legal costs for the year were €nil (2017: €nil). Staff Welfare costs were €0.2m, of which external relations were €0.01m (2017: €0.2m, of which external relations were €0.03m).

Principles of Good Governance

Board Members

The Board constitutes a non-executive Chairperson, the Chief Executive, in his role as an executive Director, Deputy Chairperson, an employee representative Director and seven non-executive Directors. All Directors are appointed by the Minister for Communications, Climate Action and Environment and their terms of office are set out in writing.

The Board

While day to day responsibility for the leadership and control of the Group is delegated to the Chief Executive and his Management Team, within defined authority limits, the Board is ultimately responsible for the performance of the Group.

The Directors have individually resolved to comply with, the Group’s Code of Business Conduct for Directors.

Annual reviews are conducted of the performance of the Board and the Chairperson. The Board has a formal schedule of matters specifically reserved to it for decision at the Board Meetings normally held monthly. Board papers are sent to Board members in the week prior to Board Meetings.

The Board Members, in the furtherance of their duties, may avail of independent professional advice. All Board Members have access to the advice and services of the Company Secretary. Insurance cover is in place to protect Board Members and Officers against liability arising from legal actions taken against them in the course of their duties.

The Board conducts an annual review of the effectiveness of the system of internal controls including financial, compliance and risk management. As noted in the Internal Controls section of the Directors’ Report, the Board has not identified, nor been advised of, any failings or weaknesses which it has determined to be significant.

Board Committees in 2018

The Board has an effective committee structure to assist in the discharge of its responsibilities, consisting of a number of committees. During the financial year the standing committees were: the Audit Committee, the Remuneration Committee, the Grid Infrastructure Projects Committee, the Public Affairs Committee and the Risk Committee. During the financial year the Board reviewed the remit of each of the committees and updated the membership of its committees.

The Audit Committee’s function is to assist the Board in fulfilling its oversight responsibilities relating to the financial reporting process, the system of internal control, the audit process, monitoring the independence of the auditors and compliance with laws and regulations including the Code of Practice for the Governance of State Bodies. The Board is satisfied that at all times during the financial year at least one member of the Committee had recent and relevant financial experience.

EirGrid plc has adhered to Government policy in relation to the total remuneration of the Chief Executive. The Chief Executive’s remuneration is set within a range determined by the Department of Public Expenditure and Reform and the Department of Communications, Climate Action and Environment. The Remuneration Committee approves the structure of remuneration for Senior Management.

The Grid Infrastructure Projects Committee’s function is to oversee the implementation of grid development strategy and review infrastructure projects which are expected to come forward for approval to the Board.

The Public Affairs Committee’s function is oversight of public affairs and stakeholder engagements across the Group.

The Risk Committee’s function is to oversee and monitor the Risk Management Policy and Risk Management Framework, review EirGrid’s risk appetite and review the effectiveness of responses to key risk exposures.

Attendance at Meetings

Board Meetings
There were 13 Board meetings held during the financial year ended 30 September 2018. The Board Members’ attendances at these meetings were as set out below:

Eligible to Attend Attended
John O’Connor (Chairperson) 13 13
Mark Foley (appointed 25 June 2018) 4 4
Michael Hand 13 11
Shane Brennan 13 12
Lynne Crowther 13 12
Theresa Donaldson 13 8
Fintan Slye (resigned 3 January 2018) 4 4
Joan Smyth (resigned 30 June 2018) 9 8
Tom Coughlan (appointed 1 July 2018) 4 2
John Trethowan 13 13
Eileen Maher 13 13
Liam O'Halloran 13 12

Members of the Board at the date of signing of the financial statements were John O’Connor (Chairperson), Mark Foley, Tom Coughlan, Shane Brennan, Lynne Crowther, Theresa Donaldson, Michael Hand, Eileen Maher, Liam O’Halloran and John Trethowan.

Audit Committee

There were 5 Audit Committee meetings held during the financial year ended 30 September 2018. The Committee Members’ attendances at these meetings were as set out below:

Eligible to Attend Attended
John Trethowan (Chairperson) (appointed 1 July 2018) 5 5
Joan Smyth (Former Chairperson) (resigned 30 June 2018) 4 4
Tom Coughlan (appointed 1 July 2018) 1 0
Michael Hand 5 4
Liam O'Halloran (resigned 30 June 2018) 4 3
Eileen Maher (appointed 1 July 2018) 1 1

Members of the Audit Committee at the date of signing of the financial statements were John Trethowan (Chairperson), Tom Coughlan, Michael Hand and Eileen Maher.

Remuneration Committee

There were 7 Remuneration Committee meetings held during the financial year ended 30 September 2018. The Committee Members’ attendances at these meetings were as set out below:

Eligible to Attend Attended
John O'Connor (Chairperson) (appointed on 1 July 2018) 7 7
Liam O’Halloran 7 7
Theresa Donaldson (appointed 1 July 2018) 1 1
Joan Smyth (resigned from committee and as chairperson 30 June 2018) 6 6

Members of the Remuneration Committee at the date of signing of the financial statements were John O’Connor (Chairperson), Liam O’Halloran and Theresa Donaldson.

Grid Infrastructure Projects Committee

There were 4 Grid Infrastructure Projects Committee meetings held during the financial year ended 30 September 2018. The Committee Members’ attendance at these meetings were as set out below:

Eligible to Attend Attended
Michael Hand (Chairperson) (appointed 1 July 2018) 4 4
John O'Connor (resigned as chairperson on 30 June 2018 but continued on committee) 4 4
Eileen Maher (resigned 30 June 2018) 3 3
Tom Coughlan (appointed 1 July 2018) 1 0
John Trethowan (resigned 30 June 2018) 3 3
Lynne Crowther (appointed 1 July 2018) 1 1

Members of the Grid Infrastructure Committee at the date of signing of the financial statements were Michael Hand (Chairperson), John O’Connor, Tom Coughlan and Lynne Crowther.

Public Affairs Committee

There were 4 Public Affairs Committee meetings held during the financial year ended 30 September 2018. The Committee Members’ attendances at these meetings were as set out below:

Eligible to Attend Attended
Theresa Donaldson (Chairperson) 4 4
Shane Brennan 4 4
Lynne Crowther 4 4
Eileen Maher 4 4

Members of the Public Affairs Committee at the date of signing of the financial statements were Theresa Donaldson (Chairperson), Shane Brennan, Lynne Crowther and Eileen Maher.

Risk Committee

There were 4 Risk Committee meetings held during the financial year ended 30 September 2018. The Committee Members’ attendances at these meetings were as set out below:

Eligible to Attend Attended
Liam O'Halloran (Chairperson) 4 4
Shane Brennan 4 4
Lynne Crowther (resigned 30 June 2018) 3 3
Theresa Donaldson (resigned 30 June 2018) 3 3
John Trethowan (appointed 1 July 2018) 1 1
John O'Connor (appointed 1 July 2018) 1 1

Members of the Risk Committee at the date of signing of the financial statements were Liam O’Halloran (Chairperson), Shane Brennan, John Trethowan and John O’Connor.

Principal Risks and Uncertainties

Risk Management

The Group has in place an appropriate risk management process that identifies the critical risks to which it is exposed and ensures that appropriate risk mitigation measures are taken. The Directors continually carry out robust assessments of the principal risks facing the Group. The Group’s internal audit function continually reviews the internal controls and systems throughout the business and makes recommendations for improvement to the Audit Committee. The Group has a Risk Committee in place to oversee and monitor the Risk Management Policy and Risk Management Framework, review EirGrid’s risk appetite and review the effectiveness of responses to key risk exposures.

Financial

The main financial risks faced by the Group relate to liquidity risk, market risk (specifically foreign exchange rate risk, interest rate risk and cash flow risk) and credit risk. Policies to protect the Group from these risks are regularly reviewed, revised and approved by the Board as appropriate.

The Group’s principal financial risk is that there is inadequate liquidity in the event of a significant regulatory under-recovery. The Board seeks to ensure that adequate banking lines are in place to enable it to fund such a requirement, pending recovery in a subsequent regulatory pricing period.

As a regulated business, operating in Ireland and Northern Ireland, the Transmission System Operator activities do not involve any significant pricing risks. The Group derives approximately 22% of its revenues from the UK and hence has an exposure to Euro/Sterling currency fluctuations. This risk is partially mitigated by the majority of both revenue and expenditure from UK operations being denominated in Sterling. The Group has sought to further reduce this exposure by funding UK operations using Sterling borrowings.

The Group funds some of its operations using borrowings. The Group seeks to minimise the effects of the interest rate risks arising from its operational and financial activity by using derivative financial instruments to hedge risk exposures. The Group has entered into interest rate derivatives to fix interest rates on its EWIC related debt. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

The Group discharges its Market Operator obligations through a contractual joint operation. Under the terms of the Trading and Settlement Code for the Single Electricity Market (“SEM”) each participant is required to provide credit cover at a level notified to it by the Market Operator. Such credit cover can be provided by means of an irrevocable standby letter of credit or a cash deposit held in a SEM collateral reserve account (security accounts held in the name of market participants). Any bad debt arising in the SEM, to the extent that it exceeds the available credit cover, is shared by generators and is not borne by the Market Operator. Appropriate arrangements are also in place to effectively manage the Group’s credit risk arising from its Transmission System Operator activities.

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group is exposed to credit risk from the counterparties with whom it holds its bank accounts. The Group mitigates its exposure by spreading funds across a number of financial institutions which have a credit rating, from an independent rating agency, consistent with the Treasury Policy approved by the Board. The Group is also exposed to counterparty risk on undrawn facilities and interest rate swap instruments. Consistent with our Treasury Policy the Group deals only with counterparties with high credit ratings to mitigate this risk.

The Group’s policy and practice is to settle invoices promptly according to terms and conditions agreed with suppliers.

System and Market Operations

The Group is responsible for the secure operation of the transmission systems in Ireland and Northern Ireland and for the operation of the all-island Single Electricity Market. A complete programme is in place to discharge this responsibility. This includes:

  • Back-up sites for the control centres in Dublin and Belfast, which are regularly tested;
  • Comprehensive insurance program placed in conjunction with expert insurance advisors;
  • Comprehensive power system operational procedures which are regularly reviewed and are in line with best international practice;
  • Grid maintenance standards and policies, supported by a detailed Infrastructure Agreement with ESB as the Transmission Asset Owner in Ireland;
  • Transmission System Security and Planning Standards, supported by a Transmission Interface Arrangement with NIE as the Transmission Asset Owner in Northern Ireland;
  • Support of the pre-construction phase of the development of the network in Ireland and Northern Ireland by a fully functioning Program Management Office, which has effective and appropriate policies, processes and controls; and
  • Continuous management focus on all aspects of health and safety. A Safety Management System (certified to OHSAS 18001) has been approved and implemented.

Pensions

EirGrid operates two defined benefit schemes for qualifying employees. Risks to the cost of providing such schemes include changes in interest rates, level of return on pension assets, changes in life expectancies and changes in price and salary inflation. The current IAS19 Employee Benefits deficit included in the financial statements at 30 September 2018, after an asset ceiling has been applied but before deferred tax, is €32.4m (2017: €24.1m). The Group also operates an approved defined contribution scheme for employees of SONI Limited.

Network Development

EirGrid has the responsibility to put in place the grid infrastructure required to support the development of Ireland’s and Northern Ireland’s economies. EirGrid’s principal activities in this regard are the planning for, and delivery of, new connections to generators and customers utilising, or seeking to utilise, the high voltage electricity system and transmission network reinforcement projects across Ireland and Northern Ireland. There is a risk of delay and consequential increase in cost associated with complex network projects of this nature. To manage this, EirGrid publishes guidance on network development and has a robust project assessment framework in place. It also continually assesses its processes and procedures to ensure that they are in line with best practice and appropriate for the business and meets the needs of the public and those communities we engage with.

Regulated Environment

EirGrid operates in a regulated environment (with the exception of its Telecoms business). Regulatory policy changes could materially affect how we operate and our financial performance. We have a dedicated Regulatory team in place and seek to engage constructively and pro-actively at all times with the Regulatory Authorities.

East West Interconnector

The Group is responsible for the asset management and operation of the East West Interconnector (“EWIC”) which links the electricity grids in Ireland and Great Britain. There is a risk of physical damage to EWIC resulting in possible prolonged outage of EWIC together with significant reinstatement costs; however there are comprehensive operational procedures and maintenance arrangements for the East West Interconnector in place, including appropriate insurance arrangements.

Brexit

A Review Group has been established by EirGrid to monitor risks associated with Brexit. The group reports regularly to the Board.

Cyber Security

EirGrid recognises Cyber Security as a critical risk. We operate a full suite of security policies and standards and have deployed comprehensive perimeter defence mechanisms. Security Awareness training is rolled out to all staff and we have ongoing IT Security monitoring and compliance reporting. We maintain a close working relationship with the National Cyber Security Centre and European TSOs on all cyber matters.

Other – Non Financial Information

EirGrid is committed to achieving and maintaining the highest standards of Health, Safety and Welfare for all of its staff and for any other persons who may be affected by our activities, and to the protection of the Environment.

EirGrid operates a Health, Safety & Environmental (HS&E) Management System based on the requirements of the International Occupational Health & Safety Standard: OHSAS18001:2007 and the Environmental Management Standard ISO14001:2015.

Our HS&E Management System enables us to consider various risks associated with our activities, to staff and others who may be affected by these activities, and those to the environment; and to place these risks in the context of any relevant legal or other requirements, thereby ensuring that preventative & control measures are adequate and meet best practise standards.

We recognise that we have a responsibility to demonstrate sound environmental management and promote sustainability. We have in place a programme to manage our environmental impacts responsibly through setting strategic objectives annually, and will endeavour to implement best practice when practicable. We set strategic objectives annually to support the ‘Preservation’ area of our corporate social responsibility strategy. Our Preservation Pledge is: ‘We respect the environment: We strive for best practice in environmental protection when developing the grid. We enable the grid to carry ever-growing amounts of renewable electricity. We carefully manage our own environmental impacts.

Our commitment is to conduct our activities in an environmentally responsible manner to protect the environment from harm, degradation, prevent pollution and continually improve the management systems performance. We will actively promote awareness among our employees through appropriate communication and training programmes. We also recognise the indirect impacts of 3rd parties in our supply chain and operate our procurement processes in line with local Government Guidelines. Policies actively utilised in managing these processes include Anti Bribery and Modern Slavery Policy.

The Group Health, Safety & Environmental Committee, which is made up of staff members from across the business, is responsible for evaluating and proposing suitable environmental objectives to the Executive Team.

In the context of climate change and the need to decarbonise the electricity supply, EirGrid is playing a key role in connecting high levels of renewable energy and in developing the electricity grid to connect renewable sources, in line with EU and Government targets. EirGrid is developing the Transmission System with due regard for the environment through sound environmental practices and full compliance with its environmental obligations.

Internal Controls

An internal control system encompasses the policies, processes, tasks, behaviours and other aspects of a Group that, taken together:

  • Facilitate effective and efficient operations by enabling the Group to respond to risks;
  • Ensure the quality of internal and external reporting; and
  • Ensure compliance with applicable laws, regulations and internal policies.

The Board has overall responsibility for the Group’s systems of internal control and for monitoring their effectiveness and in this regard the Board’s objective is to maintain a sound system of internal control to safeguard shareholders’ interests and the Group’s assets. These systems are designed to provide reasonable, but not absolute, assurance against material misstatement or loss. In order to discharge its responsibility in a manner which ensures compliance with legislation and regulations, the Board established an organisational structure with clear reporting procedures, lines of responsibility, authorisation limits, segregation of duties and delegated authority.

The key elements of the Group’s internal control processes are:

  • Defined policies and procedures in relation to expenditure and treasury matters;
  • Timely financial reporting on a monthly basis;
  • Preparation of, and monitoring performance against, annual budgets which are reviewed and approved by the Board;
  • An internal audit function which reviews critical systems and controls;
  • An Audit Committee that considers reports and Financial Statements before submission to the Board;
  • Regular performance of a risk management process;
  • Procedures to ensure compliance with laws and regulations; and
  • A Risk Committee to assist the Board in fulfilling its oversight responsibilities relating to the management of risk.

The Group has put in place a framework for monitoring and reviewing the effectiveness of internal controls, including its risk management process. The Directors confirm that they have reviewed the effectiveness of the system of internal control operated during the period covered by these Financial Statements. During the course of this review, the Board has not identified, nor been advised of, any failings or weaknesses which it has determined to be significant. Therefore a confirmation in respect of necessary actions has not been considered appropriate.

The Group has an internal audit function which delivers an annual programme of audits to ensure that there are effective controls operating across key financial processes and those areas of higher risk exposure. The Group’s Head of Internal Audit & Compliance reports to the Audit Committee quarterly and, on an annual basis, presents an assurance statement on the effectiveness of internal control, risk management and corporate governance. Under the internal audit arrangements in place, Internal Audit has access to external specialist resources to support its activities.

Directors’ Remuneration

The Financial Statements include €122,000 (2017: €97,000) for Chairperson’s and Directors’ fees, in accordance with the Department of Finance approved levels of remuneration for the Chairperson and Board Members of State Bodies and the revised arrangements for payment of board fees to public sector employees under the Department of Public Expenditure and Reform’s “One Person One Salary” Principle. In 2009 the Department of Communications, Climate Action and Environment issued an instruction that Chairperson and Directors’ fees be reduced. Prior to this instruction being issued the Chairperson and Directors had already decided to take a voluntary 10% reduction in their fees. Under the approved remuneration levels, the Chairperson’s fees were equivalent to €21,600 per annum during the financial year (2017: €21,600 per annum). Directors’ fees were equivalent to €12,600 each per annum during the year (2017: €12,600 each per annum).

The executive Board Members during the year were the Chief Executives, Fintan Slye who resigned on the 3 January 2018 and Mark Foley who was appointed on the 25 June 2018. Aidan Skelly was appointed as the interim Chief Executive between 3 January 2018 and 25 June 2018. The Chief Executive’s remuneration is set within a range determined by the Department of Public Expenditure and Reform and the Department of Communications, Climate Action and Environment.

The remuneration of the Chief Executive consists of basic salary, taxable benefits and certain retirement benefits. The retirement benefits of the Chief Executive are calculated on basic pay only and aim to provide in retirement a pension of one-eightieth and a gratuity of three-eightieths of salary for each year of service as Chief Executive.

Chief Executive's Remuneration

Basic Salary €'000 Annual Bonus €'000 Taxable Benefits €'000 Pension Contributions paid (all defined benefit) €'000 Director's fees €'000 Total €'000
Fintan Slye 52 - 5 8 - 65
Aidan Skelly 100 - 7 20 - 127
Mark Foley 54 - 3 11 - 68
30 September 18 206 - 15 39 - 260
30 September 17 170 - 18 29 - 217

Dividends

In evaluating the annual dividend that the Group may propose the Board considers the following key factors:

  • Available Cash: The Group receives tariff revenues, which are reflected through the Income Statement which fund operational expenses of the Group and capital projects which are capitalised and depreciated over the future periods. This creates a mismatch between available cash and reported profits.
  • Expected adjustment for under/over recovery: Any under or over recovery of costs through tariff revenue is not recognised in the Financial Statements. The dividend policy reflects the expected impacts on future profits of the adjustment for the current financial year under/over recovery in future tariff rates.
  • Future investments: The Group funds a portion of capital projects through existing resources. The dividend policy considers expected and committed future investments.
  • Legal Requirements: The Group must comply with the provisions of the Companies Act 2014 when making distributions.
  • Liquidity: As noted previously the Group’s principal financial risk is that there is inadequate liquidity in the event of a significant regulatory under recovery. The dividend policy considers the prudent management of this risk.

Having considered these factors the Directors of the Group propose the payment of a final dividend of €4,000,000 (2017: €4,000,000) for the financial year ended 30 September 2018.

Directors’ and Secretary’s Interest in Shares

The Directors and Secretary who held office between 1 October 2017 and 30 September 2018 had no beneficial interest in the shares of the Group.

One ordinary share of the Company is held by the Minister for Communications, Climate Action and Environment and the remainder of the issued share capital is held by the Minister for Public Expenditure and Reform, or on his behalf.

John O’Connor, Mark Foley and Tom Finn hold one share each in the share capital of the Company on behalf of the Minister for Public Expenditure and Reform.

Political Donations

The Group does not make political donations.

Going Concern

The Financial Statements are prepared on a going concern basis as the Board, after making appropriate enquiries, is satisfied that the Group has adequate resources to continue in operation for the foreseeable future.

Accounting Records

The measures that the Directors have taken to secure compliance with the requirements of Sections 281 to 285 of the Companies Act 2014 with regard to the keeping of accounting records are the employment of appropriately qualified accounting personnel and the use of suitable accounting systems and procedures. The accounting records are kept at The Oval, 160 Shelbourne Road, Ballsbridge, Dublin 4.

Post Balance Sheet Events

Details of significant post balance sheet events are set forth in Note 27 of the financial statements.

Auditors

The auditors, Deloitte, Chartered Accountants and Statutory Audit Firm, have indicated their willingness to continue in office in accordance with Section 383(2) of the Companies Act 2014.

Disclosure of Information to Auditors

So far as each of the Directors in office at the date of approval of the financial statements is aware:

  • there is no relevant audit information of which the Company’s auditors are unaware; and

  • the Directors have taken all the steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that the Company’s auditors are aware of that information.

Directors' Compliance Statement

For the purposes of section 225 of the Companies Act 2014 (the “Act”), we, the Directors:

  • Acknowledge that we are responsible for securing the Company’s compliance with its relevant obligations as defined in section 225 (1) of the Act (the “relevant obligations”); and
  • Confirm that each of the following has been done:

(I) a compliance statement (as defined in section 225(3)(a) of the Act) setting out the Company’s policies (that in our opinion, are appropriate to the Company) respecting compliance by the Company with its relevant obligations has been drawn-up;

(II) appropriate arrangements or structures, that are, in our opinion, designed to secure material compliance with the Company’s relevant obligations, have been put in place; and

(III) during the financial year to which this report relates, a review of the arrangements or structures referred to in paragraph (ii) above has been conducted.

Directors’ Responsibilities Statement

The Directors’ are responsible for preparing the Directors’ Report and the financial statements in accordance with the Companies Act 2014 and the applicable regulations.

Irish company law requires the Directors to prepare financial statements for each financial year. Under the law, the Directors have elected to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and the Company financial statements in accordance with FRS 101 reduced disclosure framework (March 2018). Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the assets, liabilities and financial position of the Company and the Group as at the financial year end date and of the profit or loss of the Group for the financial year and otherwise comply with the Companies Act 2014.

In preparing these financial statements, the Directors are required to:

  • select suitable accounting policies for the Parent company and the Group financial statements and then apply them consistently;
  • make judgements and estimates that are reasonable and prudent;
  • state whether the financial statements have been prepared in accordance with applicable accounting standards, identify those standards, and note the effect and the reasons for any material departure from those standards; and
  • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for ensuring that the Company keeps or causes to be kept adequate accounting records which correctly explain and record the transactions of the Company, enable at any time the assets, liabilities, financial position and profit or loss of the Company to be determined with reasonable accuracy, enable them to ensure that the financial statements and Directors’ Report comply with the Companies Act 2014 and enable the financial statements to be audited. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website.

John O'Connor - Chairperson

Mark Foley - Chief Executive

John Trethowan - Chairperson Audit Committee

19 December 2018

Independent Auditors’ Report to the Members of EirGrid Plc

Report on the audit of the financial statements

Opinion on the financial statements of EirGrid plc (the “company”)

In our opinion the group and parent company financial statements:

  • give a true and fair view of the assets, liabilities and financial position of the group and parent company as at 30 September 2018 and of the profit of the group for the financial year then ended; and
  • have been properly prepared in accordance with the relevant financial reporting framework and, in particular, with the requirements of the Companies Act 2014.

The financial statements we have audited comprise:

the group financial statements:

  • the Consolidated Income Statement;
  • the Consolidated Statement of Comprehensive Income;
  • the Consolidated Balance Sheet;
  • the Consolidated Statement of Changes in Equity;
  • the Consolidated Cash Flow Statement; and
  • the related notes 1 to 28, including a summary of significant accounting policies as set out in note 2.

the parent company financial statements:

  • the Company Balance Sheet;
  • the Company Statement of Changes in Equity;
  • the Company Cash Flow Statement; and
  • the related notes 29(A) to 29(Y), including a summary of significant accounting policies as set out in notes 2 and 29(A).

The relevant financial reporting framework that has been applied in the preparation of the group financial statements is the Companies Act 2014 and International Financial Reporting Standards (IFRS) as adopted by the European Union (“the relevant financial reporting framework applicable to the group”). The relevant financial reporting framework that has been applied in the preparation of the parent company financial statements is the Companies Act 2014 and FRS 101 “Reduced Disclosure Framework” issued by the Financial Reporting Council (“the relevant financial reporting framework applicable to the company”).

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (Ireland) (ISAs (Ireland)) and applicable law. Our responsibilities under those standards are described below in the “Auditor’s responsibilities for the audit of the financial statements” section of our report.

We are independent of the group and parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in Ireland, including the Ethical Standard issued by the Irish Auditing and Accounting Supervisory Authority, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

We have nothing to report in respect of the following matters in relation to which ISAs (Ireland) require us to report to you where:

  • the directors’ use of the going concern basis of accounting in preparation of the financial statements is not appropriate; or
  • the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the group or parent company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

Other information

The directors are responsible for the other information. The other information comprises the information included in the Annual Report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.

We have nothing to report in this regard.

Responsibilities of directors

As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view and otherwise comply with the Companies Act 2014, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the group and parent company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group and parent company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (Ireland) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISAs (Ireland), we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

  • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
  • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the group and parent company’s internal control.
  • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
  • Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the group and parent company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of the auditor’s report. However, future events or conditions may cause the entity (or where relevant, the group) to cease to continue as a going concern.
  • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
  • Obtain sufficient appropriate audit evidence regarding the financial information of the business activities within the group to express an opinion on the consolidated financial statements. The group auditor is responsible for the direction, supervision and performance of the group audit. The group auditor remains solely responsible for the audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that the auditor identifies during the audit.

This report is made solely to the company’s members, as a body, in accordance with Section 391 of the Companies Act 2014. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Report on other legal and regulatory requirements

Opinion on other matters prescribed by the Companies Act 2014

Based solely on the work undertaken in the course of the audit, we report that:

  • We have obtained all the information and explanations which we consider necessary for the purposes of our audit.
  • In our opinion the accounting records of the parent company were sufficient to permit the financial statements to be readily and properly audited.
  • The parent company balance sheet is in agreement with the accounting records.
  • In our opinion the information given in those parts of directors’ report as specified for our review is consistent with the financial statements and has been prepared in accordance with the Companies Act 2014.

Matters on which we are required to report by exception

Based on the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in those parts of directors' report that have been specified for our review.

The Companies Act 2014 also requires us to report to you if, in our opinion, the Company has not provided the information required by Regulation 5(2) to 5(7) of the European Union (Disclosure of Non-Financial and Diversity Information by certain large undertakings and groups) Regulations 2017 (as amended) for the financial year ended 30 September 2018. We have nothing to report in this regard.

We have nothing to report in respect of the provisions in the Companies Act 2014 which require us to report to you if, in our opinion, the disclosures of directors’ remuneration and transactions specified by law are not made.

Under the Code of Practice for the Governance of State Bodies (August 2016) (the “Code of Practice”), we are required to report to you if the statement regarding the system of internal financial control required under the Code of Practice as included in the Corporate Governance Statement in the Directors Report does not reflect the group’s compliance with paragraph 1.9(iv) of the Code of Practice or if it is not consistent with the information of which we are aware from our audit work on the financial statements. We have nothing to report in this respect.

Ciarán O'Brien
For and on behalf of Deloitte Ireland LLP
Chartered Accountants and Statutory Audit Firm

21 December 2018